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MULTI PART QUESTION- PLEASE READ. Your company XXX is looking at YYY company...

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Finance

MULTI PART QUESTION- PLEASE READ.

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Your company XXX is looking at YYY company to purchase it. The current price tag of YYY is $1.2 million. XXX has a beta of 1.5. The market is expected to have a return of 19% and the current 10-year t bond pays 3.5%. YYY company is expected to have cash flows of $250,000 in year one, $150,000 in year two, and $250,000 in year four. The YYY company is expected to grow at 5% indefinitely after that xxx company has a debt to equity ratio of 1/3 and a tax bracket of 35%. The cost of debt (before taxes) is estimated to be 796 What is the cost of equity for XXX company? (Points : 5) 26.75% 32.05% ? 23.25% 24.21% 29.77% What is XXX'S WACC? (Points 5) 21.2% o 21.8% 28.3% O 22.5% 23.7% What is the "approximate" terminal vaue for YY for the 4th year (TV4)? O 1,620,370 O 1,238,208 O 1,543,209 O 1,667,559 O 1,728,466 What is the approximate NPV of purchasing YYY? O positive 23,807 O negative 24,819 O negative 20,478 O negative 819,909 O positive 102,574

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